It was 1986... and my first fall working on Wall Street for Goldman Sachs. It was election season, and Robert Rubin was walking the trading floor. He was head of the fixed-income division. (He soon became co-chair of the company and later Secretary of the U.S. Treasury.)
Rubin asked us if we had turned in our donations to the political party of our choice. He asked each of us – one by one – right on down the desk.
If we said no, he told us he wanted to see a check signed from us soon. When he walked away, I asked what he was up to. The guys on the desk laughed and just told me to cough up a thousand for the Democratic Party by tomorrow. I protested: "But I'm Republican."
The response: "Not anymore!"
I hadn't thought about that moment in a long time until I read the sensational Rolling Stone article recently written by Matt Taibbi. The article is a true "exposé" of the BS that goes on in the financial world.
The subject is one I'm well versed in: The investment bank Goldman Sachs (by now, known by many as "Government Sachs"). Taibbi shreds the company in an article titled The Great American Bubble Machine, and it's an absolute must-read.
The article claims Goldman has helped engineer most of the great asset bubbles of the past 80 years... including the tech bubble, the credit bubble, and last year's enormous rise in oil prices. Taibbi also writes Goldman has packed the highest levels of government with former employees, who help it suck billions of dollars from a gullible public.
It's one of the most damning articles I've ever read in mainstream media. So it's no wonder I've had several friends ask me, "Doc... You worked for Goldman for a long time. What's your take?"
I tell them: It's appalling. And, sadly... mostly true.
For years, Goldman has used fear and greed to control markets and make millions for its employees and shareholders. During the credit bubble peak in 2007, the company doled out over $20 billion to its employees. Its CEO made $65.8 million that year. At last count, the average employee compensation will be around $386,000 for just the first six months of this year.
Sure... the money is insane. But I don't begrudge any smart banker or trader for making money within the rules. It's the way Goldman has stuffed its alumni into the most important positions in government... it's similar to mafia corruption. It ensures they play a major role in fixing the rules for their cronies' benefit... and your loss.
Here's a short list of ex-Goldman heads who've greased the political wheels for the company: Henry Paulson (former CEO, went on to become Treasury Secretary under Bush), John Corzine (former CEO, current governor of New Jersey), Stephen Friedman (former director, became Chief of the New York Fed)... and, of course, the aforementioned Robert Rubin. (You can read about plenty more "implants" here.)
Current and ex-Goldman employees won't even consider the possibility there are conflicts of interest with the Treasury Secretary (an ex-Goldman head) deciding to let one of Goldman Sachs' main competitors – Bear Stearns – go belly up.
And it's insulting to think a government employee can give my tax money to a company that was going bankrupt without any oversight or public discussion in Congress. I'm talking about AIG Insurance, which, incidentally, had big deals with Goldman that would have gone sour without the bailout.
Sure, Taibbi went over the top with his assertions. But the spirit of the article – and most of its claims – is 100% true. The fleecing and manipulation of regular folks like you and me is simply outrageous.
Goldman Sachs – and nearly every other Wall Street institution – is not in the business of helping you find safe investments. It's in the business of selling overpriced stocks and bogus mortgages to anyone it can find. It's in the business of siphoning big fees from your 401(k) plan, your mutual fund, your annuity, and your kid's college fund.
This is how Wall Street bankers live in million-dollar mansions in the Hamptons, drive Maseratis, and dash off for $20,000 weekends in London. It's why you probably haven't made a dime in stocks over the past 15 years. Wall Street doesn't care if you make any money... just as long as you keep paying their fees. And the financial policymakers in Washington D.C. who aren't socialist morons are bright capitalists who work indirectly for Goldman. It's a crazy mixture that loads the system with huge risks.
Bravo to Rolling Stone and Matt Taibbi. I lived and worked in the environment described in the article. While there are some great people and institutions in New York, I left Wall Street because I couldn't stand the Goldman-style conflicts of interest and political haggling.
The sooner investors wake up and become highly skeptical of everything Wall Street and Washington D.C. do, the better.
Good investing,
Doc Eifrig
P.S. I feel so strongly about "getting the word out" on paying fewer fees and taxes to Wall Street and Washington that I started my own advisory on the subject. If you'd like to join me in "stealing back" what's rightfully ours, consider a free trial subscription. To learn more about a subscription – and my favorite way to buy financial peace of mind for much less than you ever thought possible – click here.
P.P.S. I am no longer a Republican. I count myself an independent thinker.
This week's chart displays a stretched rubber band ready to snap back.
The "stretch" comes from a historic run in the tech-heavy Nasdaq Composite Index. It just enjoyed an incredible 12 consecutive days of gains. It's one of the longest unbroken strings of positive days ever for the index... and it took the Nasdaq an incredible 13% higher.
Now here's the stretched part: Markets are like runners. They can't run flat-out for miles and miles without easing back to take a breather.
At the bottom of the chart is an indicator called "RSI." It measures a market's "stretch" condition to the upside or downside. A reading over 70 indicates a market overstretched to the upside.
As you can see, despite Friday's small decline, the RSI is still "overstretched"... the same condition that preceded market falls in May and June. Expect short-term bets against this market to work when the shakeout strikes.
Today, I'm going to share several of my favorite technical indicators and patterns. Becoming familiar with them will help you to spot the best trading opportunities in the market.
